BL-Chapter 12 - 1 CHAPTER 12 CAPACITY AND LEGALITY Capacity...

CHAPTER 12 CAPACITY AND LEGALITY Capacity • Law presumes that parties have contractual capacity to enter into the contract. • Certain persons do not have this capacity: – Minors – Insane persons – Intoxicated persons • Common law and many state statutes protect persons who lack contractual capacity from having contracts forced on them. • Person asserting incapacity or his guardian, conservator, or other legal representative bears burden of proof. Legality-An essential element for a contact is that the object of the contract be lawful-A contract to perform an illegal act is called an illegal contract and is void-cannot be enforced by either party -The term illegal contract is a misnomer because no contract exists if the object of the contract is illegal-Some courts hold that unconscionable contracts (one that is so oppressive or unfair that it would be unjust to enforce) are unenforceable Minors-Minors don’t always have the maturity, experience, or sophistication needed to enter into contracts with adults 1

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• Common law defines minors as: – Females under the age of 18; and – Males under the age of 21 • Many states have enacted statutes that specify the age of majority. – Generally 18 years of age for both males and females.-Period of minority-any age below the statutory age of majority Infancy Doctrine • Minors may disaffirm ( cancel ) most contracts they have entered into with adults. – Contract is voidable by minor. – Minor has choice to enforce or disaffirm contract. • The right is base on public policy of protecting minors from the unscrupulous behavior of adults. • In most state, the infancy doctrine is an objective standard • If a person’s age is below the majority, the court will not inquire into his knowledge, experience, or sophistication-Contracts for the necessaries of life however are exempted from the scope of the doctrine-Under the infancy doctrine the minor has the option of choosing whether to enforce the contract (i.e. the contract is voidable by the minor) The adult is bound to the minor’s decision. If both parties are minors, both have the right to disaffirm the contract-A minor may not affirm one part of a contract and disaffirm another part 2

Disaffirmance • Disaffirmance – minor’s act of rescinding a contract under infancy doctrine. – May be done orally, in writing, or by conduct. – Must be done any time prior to the person reaching the age of majority and within a reasonable time Minor’s Duty of Restoration-If a minor’s contract is executory and neither party has performed, the minor can simply disaffirm the contract-There is nothing to recover since neither party has given the other party anything -If the parties have exchanged consideration and partially or fully performed the contract by the time the minor disaffirms the contract, the issue becomes one of what consideration or restitution must be made Competent party’s duty of restitution – Adult has duty of restitution

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